Ovum Study Finds Moderate Disruption Likely in Communication Industry

The recent instability in the financial markets has caused speculation on its effect on the communications industry. Recognizing that many companies are now setting budgets for next year and need to make assumptions on how current events will play out, Ovum (News - Alert) is offering what company officials describe as "several planning scenarios that put boundaries on the uncertainties in the telecoms industry for 2009."

 

Ovum officials say the most likely scenario is a generally mild impact on the telecoms industry, with growth and spending slowing but not declining. The scenarios are described in the October edition of Ovum's Straight Talk Monthly communication to clients.

 

"Scenario planning was made for times like this," says John Lively, the report's author and Ovum's Chief Forecaster. Ovum officials say they used their database of service provider revenues and capital spending to look at what has happened during past recessions and during the tech bubble burst of 2001-2002.

 

Three scenarios were created based on different revenue growth rates and different levels of capital spending as a percent of revenue. The scenarios can be summarized as follows:

 

Optimistic case: brief slowdown in 2H08 with growth rates of revenue and capex returning to 2007 levels in 2009.

 

Most likely case: reduced growth rates in 2H08 continuing through 2009.

 

Pessimistic case: declines in wireline revenue and capex, with fixed capex falling 28 percent -- a drastic but not unprecedented decline. A significant slowdown in mobile revenues and no growth in mobile capex between 2008 and 2009.

 

Underpinning the choice of assumptions, company officials say, is a belief that the absolute worst case -- a global, severe economic depression and an unprecedented crash in the telecoms market -- will be avoided.

 

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